I second your comment on Moto hardware (I have an original Droid and a Xoom), but I think Google will use the design capability more than the manufacturing arm of Moto. I see them designing and licensing handsets (with patent protection to licensees) rather than competing in the market directly.
Larry M.

Ah, duh. Motorola already does all this "complicated h/w, supply chains" etc. It's not like Google has to develop or figure out anything. They bought kit and caboodle. There's nothing wrong with seeding the market with reference designs either (has Intel ever done that?)

Well, I think Moto has a couple of the best phones on the market, bar none. My motorola Photon is making longtime Apple fanboys drool with envy. So no question, they have have great phones. But who is going to try to fight them from an IP standpoint with all of Moto's patents! I'm sure it was a financial decision.

What has made Android so immensely successful in such a short time is its openness. This is what made the early PC so successful when compared to all of the computers of the time which were all closed. IBM sold more PC's because of the clones than they ever would have sold had they had it closed. that's why All the big names like TI fell by the wayside, because they were closed. You could only buy a printer from TI for TI computer. As a result innovation flourished. The reason why Linux has grown so quickly is because it's open and everyone wants to be part of the freedom that it brings. Compare that to Apple where you have to jump through clunky hoops to print a picture from your phone to a printer and forgot about sending SMS to a group or syncing YOUR calendar to anything other than a MAC desktop. Given the choice of Android were developers don't have their arm twisted behind their back with someone saying no you can't do that we won't let you. It's no wonder Apple and MS are running scared and are trying to strangle this opposition. Google understands this is why Android is so successful, so they won't kill the goose that lays the golden egg. You will see Motorola making phones in an open market and if Google sees that they can't run it successfully they'll spin it off keeping the patents. Still, given Moto makes great phones and the existing management understands how to run it why would you behead it? Again, Google is too smart for that.

This is why I believe it is not only about patents ... Google needs to create an identity in the smartphone market. Apple has a strong identity, and Android has done superbly well so far.
This move can only make Android better.

I also believe it's not only about patents. Google needs to have more control on the hardware (smartphone) it wants to run its Android software on.
With the PC, Google's business is based on the internet and that has worked so well over the years. However, with the smartphone, which is predominantly device-based and app-based, Google needs to have more control on the device and optimize it for Android among other future products.
I feel Google wants to have a hand in making the device as well, so it doesn't have to be limited by how innovative other manufacturers will be. (HTC, Samsung etc)
And of course if it can make a few bucks selling devices, why not? Apple continues to show that people will pay up to $600 for a phone ... that is as expensive as some laptops.

Interesting you should say that, as the patent requirement is that it should be non-obvious to someone trained in the art, ie. even if innovative it may be obvious, but if it isn't innovative then it is almost certainly is obvious.

I really agree that they are now "on more of a direct collision course". Google walks along a similar way as Apple?
But of all things, google need to protect itself from being torn down by other giants

That might have been the original intention, but patents are highly destructive to innovation.
It is really, really, hard to write any software or design any product that does not infringe or a patent, or get so close to infringing that you will end up in court.
As an engineer do you really have the time to assess the implications of patents on the work you are doing? No! All that happens is that one day you get a call saying that your original work infringes on a dubious patent.
I have a heap of patents in my name, only a few of those are really innovative.